PARSONS LOOKING FOR AOL PARTNER TO SUPERCHARGE PORTAL

NEW YORK (AdAge.com) -- America Online needs a partner that can increase its traffic and enhance its technological underpinnings and give it “a supercharge,” Time Warner CEO Richard Parsons said at a luncheon keynote at the Credit Suisse First Boston Media Week Conference at the Crowne Plaza Times Square Manhattan.

Richard Parsons

AOL pulled back from its subscriber business last summer and put forward AOL.com as a free portal. Since then, Mr. Parsons said, “We’re relatively competitive [with rivals Yahoo, MSN and Google] but we have to catch up. If we had more robust technology and were generating more advertising revenue from traffic, it would give a boost to AOL.com.” He also said that paid search advertising is one of the areas AOL wants to do a better job of selling “across our properties.”

Ongoing negotiations
After the speech, an executive close to the talks acknowledged that AOL is in ongoing negotiations with Microsoft Corp. and Google to determine which it will partner with for its search technology, but said a deal will not happen this week.

Google powers AOL.com’s search and AOL is responsible for about 12% of Google’s search revenue -- revenue that Google would like to hold onto. Microsoft, which has just rolled out its MSN search engine in the U.S. after almost a year in beta overseas, would like a partner that could bring it a larger audience and more ad dollars. Microsoft has recently reorganized to put its focus on advertising, and CEO Steve Ballmer earlier today at a separate event said Microsoft has a “keen interest” in growing its share of advertising revenue.

Both Google and MSN will bring AOL more traffic; MSN has a unique audience of about 89 million, while some 79 million users do searches on Google each month.

Mr. Parsons reiterated something he has said in the past, that he is not interested in a sale of AOL assets.

No sale
Mr. Parsons made it clear he was not interested in selling AOL outright, and that he does not want to spin off a portion of the company. Instead, he’s looking to make a deal that would enhance AOL’s existing assets and give it some muscle it has not yet built up.

AOL still has a group of 20 million consumers who subscribe to what is known as its narrowband paid site. But Mr. Parsons recognizes that door is closing. “Narrowband is an iceberg that is going to melt and we are managing it to be a profitable business for four to five years.”